One in Four Customers Are Card Fraud Victims, Study Finds

Banks need to do a better job engaging with customers and educating them about fraud, ACI's 2012 Global Fraud survey found.

A new study looking at the behavior and concerns of customers worldwide concerning card fraud was released today by payments solutions provider ACI Worldwide and the Aite Group, a research firm. The 2012 fraud report, titled "Global Consumers React to Fraud: Beware Back of Wallet," found that 27 percent of global consumers had been hit by credit card fraud over the past five years. Many of those who experienced fraud turned to using cash, checks or other cards more after receiving a replacement card. The study found that 46 percent of customers who received a replacement card because of a data breach or other fraud activity used the card less than before.

The study asked more than 5,200 customers in more than 17 countries around the globe if they had experienced card fraud and how that had change their consumer behavior. The percentage of respondents who had experienced fraud in the last five years stayed consistent with last year's findings, but there was a sharp increase in the number of respondents who had experienced fraud more than once in the last five years. This year 14 percent of the respondents had been victimized by fraudsters multiple times, compared to only 6 percent last year.

As more customers are experiencing multiple instances of fraud, they are becoming increasingly aware of fraud and accept that it is happening, Mike Braatz, SVP, Payments Fraud at ACI Wordlwide, told reporters in New York City yesterday. The good news, he explained, is that customers want to be part of the battle against fraud - they want to get alerts and approval notifications for suspicious transactions. But the study found that banks aren't doing enough to educate customers about actions they can take to prevent fraud, as 43 percent of the U.S. consumers in the study don't recall receiving any guidance from their bank regarding fraud activities.

The result is that many consumers still engage in activities that unnecessarily open themselves up to card fraud, the study noted. For instance, 23 percent of American consumers surveyed said they throw bank statements or ATM receipts in the trash without shredding them. And 18 percent of them admitted to not using the auto-lock feature on their mobile phones. Those numbers clearly illustrate a greater need for customer awareness and education about fraud.

Unfortunately, as ACI's Braatz said yesterday, "Banks have long considered fraud part of the cost of doing business." Banks build in an "acceptable" amount of fraud into their business model. In a world where consumers want to bank on their terms and fraud attacks are becoming increasingly sophisticated, that attitude might need to change. Customers who want to bank whenever and wherever need to be educated about the fraud risks out there today so they can be more proactive in helping to prevent fraud. That will require a more customer-centric view towards fraud than the conventional model of accepting a certain amount of total fraud as part of a bank's operations. That customer-centric view is exactly what ACI's fraud study was trying to encourage by going to the customers and asking about their fraud experiences. "This gets financial institutions away from that narrow view of [accepting a certain amount of] fraud and gets them to start making new investments in fraud," said Shirley Inscoe, senior analyst at Aite Group.

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio